Will Trudeau tax hurt local, Canadian wineries?

While it would be relatively easy this week to cover the latest developments of the WE Charity Foundation, as they unfold at the finance committee, I would rather focus on outcomes of government policies.

More specifically, when former Conservative Finance Minister, the late Jim Flaherty, created a very important policy to the Similkameen and Okanagan Valleys.

On July 1 in 2006, Minister Flaherty announced that wines that were produced in Canada, with 100% Canadian grown grapes, would be fully exempt from paying the federal excise tax on alcohol.

This was a policy that, according to Wine Growers of Canada President Dan Paszkowski, has “resulted in more than 400 new wineries and 40 million litres of new wine sales. The annual economic impact of this growth is $4.4 billion annually. Now that was a smart federal program with a solid ROI.”

Here in the Okanagan, we have all witnessed many wineries and resulting spin off business emerge throughout literally every community.

Flash forward to 2017, the Trudeau Liberal government introduced a permanent measure to create an “escalator excise tax” in that year’s federal budget.

What is an escalator excise tax?

As I explained in a previous column, it is a tax that “would be levied on most wine, beer and spirits sold in Canada. Under an escalator tax essentially the tax rate is increased every year and is set by civil servants linked to inflation as opposed to having to come before the House for debate in the annual budget.”

As the Conservative opposition at that time, we opposed this tax.

Unfortunately, Australia, a country that imports a significant amount of wine into Canada, filed a trade challenge with the World Trade Organization (WTO) over this policy.

The reason is that the Trudeau escalator tax would increase the cost of Australian wine to Canadian consumers every year. However, 100% Canadian grown and produced wines would be exempt.

Last week it was quietly announced that the Trudeau Liberal government will, over the course of the next two years, remove the excise exemption for 100% Canadian grown and produced wines, thus increasing their costs.

How this will impact our local wineries here in the Okanagan and elsewhere at this point remains unknown. One of the challenges is B.C. wineries already pay a significant amount of taxes to local, provincial and federal governments, that competing wines outside of Canada do not pay.

There is also the added test that currently only three Canadian provinces allow winery to consumer shipping directly from outside of the home province.

With restaurants generally purchasing less wine on account of reduced hours and capacity, these are now tough times for an important local industry to our region.

Ironically with wine sales being reduced, the considerable amount of excise and sales tax on wine is also reduced, thus netting less government revenue in these areas.

My question this week comes back to the escalator tax: Do you support a tax automatically increasing each year, set in legislation, as opposed to being fixed and reviewed each year in a budget?